Goldcorp Cuts Dividend to Deal With ‘Volatile’ Gold Market

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Goldcorp Inc., North America’s largest gold producer by market value, cut its dividend as part of a strategy to cope with slumping prices.

The monthly dividend will be reduced 60 percent to 2 cents beginning in August, the Vancouver-based company said Thursday in a statement. The decision was made even after Goldcorp said it became cash-flow positive in the second quarter after years of capital expenditures to build two new mines in Argentina and Canada. The company hasn’t been cash-flow positive since the third-quarter of 2012.

Like most of its peers, Goldcorp is working to lower costs and shore up its balance sheet amid weakening prices. The company sold a 26 percent stake in Tahoe Resources Inc. this year and expanded a credit facility from $2 billion to $3 billion.

Those measures and the dividend cut are to “ensure the company has the financial flexibility to succeed in a volatile gold market,” Chief Executive Officer Chuck Jeannes said.

Goldcorp could defer some capital projects if the price of gold continues to fall, he said during the earnings conference call. A prolonged period below $1,000 an ounce would lead the company to consider reconfiguring or closing pieces of mines, he said. Gold for December delivery fell 0.4 percent to settle at $1,088.70 at 1:52 p.m. in New York. It dropped to $1,073.70 on July 24, the lowest for a most-active contract since 2010.

Net income rose to $392 million, or 47 cents a share, from $181 million, or 22 cents, a year earlier, the company said in the statement. Profit excluding one-time items was 8 cents a share, beating the 7-cent average of 20 estimates compiled by Bloomberg. Sales climbed to $1.19 billion, topping the $1.07 billion average estimate.

Output Boost

Goldcorp fell 1.4 percent to C$16.46 at 4 p.m. in Toronto. The shares have declined 23 percent this year.

The company, which operates in North and South America, is also ramping up production at its two new mines in Canada and Argentina.

The increase in production at Eleonore, in Northern Quebec, has been slower than planned, the company said. As a result, output will be “at or below the low end” of guidance of between 290,000 and 300,000 ounces for the year. Eleonore produced 43,800 ounces of gold in the second quarter at a so-called all-in-sustaining cost of $1,656 an ounce.

By comparison, companywide all-in sustaining costs, a measure to compare miners’ performance, were $846 an ounce in the second quarter, better than the $943.50 average of six estimates.

Capex Held

Cerro Negro, Goldcorp’s new mine in Argentina, produced 131,300 ounces in the second quarter at an all-in-sustaining cost of $792 an ounce.

Goldcorp’s total second-quarter production rose to 908,000 ounces from 648,700 ounces a year earlier. Fourteen analysts estimated an average of 824,900 ounces of output. It said full-year production will be at the high end of its previous 3.3 million to 3.6 million ounce forecast.

The company maintained its capital spending guidance at $1.2 billion to $1.4 billion.

Gold futures averaged $1,192.82 an ounce in the second quarter in New York, 7.5 percent less than a year earlier.

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